189: Serial Entrepreneur Embraces Multifamily Investing

SHOW NOTES FOR EPISODE 189: SERIAL ENTREPRENEUR EMBRACES MULTIFAMILY INVESTING

Dave Zook loves business and has started many, however, real estate wasn’t one of them.  It wasn’t until his tax bill began to dwarf his successful businesses’ profits that real estate came across his path.  In this podcast episode, Dave shares how after reading Rich Dad Poor Dad, he stalked Robert Kiyosaki down on a real estate cruise seminar to find out first-hand how real estate investing could cure his tax burden.  Today, with more than 3,000 multifamily units worth more than $150 million, Dave is singing real estate’s praises as one of his favorite business assets and best tax shelter.

What You Will Learn

• What is your best tax shelter business
• How Dave got educated fast into multifamily real estate investing
• How important your team is and how to build the right team
• Why he decided to syndicate
• The benefits of syndication
• How identifying and matching needs can result in new investors
• Why you don’t need to be the expert when you surround yourself with “10,000 Hour” guys
• How “real life education” is worth more than multiple Harvard degrees
• Why it doesn’t matter when you start

About Our Guest

Dave Zook

FOUNDER & CEO Dave Zook is a successful business owner and experienced real estate investor active in the MultiFamily Apartment space and resort community development with real estate holdings in several states and several countries. Dave and his investors own well in excess of $100 Million worth of real estate acquired since 2009 and he has more than 3000 Multi-Family Apartments in his portfolio. Together with his business partner Dave is a renowned and trusted professional resource in the automatic teller machine (ATM) investment market, they have deployed more than $60 Million in investor capital and they are heavily invested personally in the ATM space. Dave, along with his development partners is actively involved in the planning and development of the largest resort community (Mahogany Bay Village) on the Island of Ambergris Caye, Belize, which has been rated the #1 Island in the world 2 years in a row by Trip Advisor and is one of the fastest growing regions in the Caribbean. Mahogany Bay Village opened to the public in December 2017 as a Curio Collection by Hilton and is the very first branded resort on the island. As a published author and popular guest speaker Dave has shared his knowledge at the International Business conference, The Jason Hartman Real Estate Mastermind, The Wealth Formula Podcast and the Real Estate Guys Radio show, the #1 most downloaded podcast on Real Estate Investing on iTunes. Dave, his wife Susan and their 4 children live in Lancaster county PA.

More About Dave

• Serial entrepreneur
• Has started and owns lots of businesses
  • Belize resort community (Mahogany Bay Village)
  • ATM machines
  • Modular buildings business (Zook Cabins) – Horse barns, garages, dog kennels
  • Mushroom growing business
  • Multifamily Real Estate ($150 million, over 3,000 units acquired since 2009)
  • Self Storage
• Became a real estate investor by accident
• Late teens/early 20s, made conscious decision not to be a real estate investor because he saw the headaches his father, who was a landlord, experienced
• Instead, launched multiple businesses
• The businesses did so well the tax burden was overwhelming (paying $100s of thousand in taxes)
• Got call from his CPA saying, after quarterly payments, etc., he still owed $300K plus in taxes, due in a few days
• Read Rich Dad Poor Dad and other books by Robert Kiyosaki and he read how you could make millions  in real estate and not pay taxes

In Pursuit of Robert Kiyosaki

• Dave wanted to meet Kiyosaki in person to find out first-hand about “tax-free income”
• He heard about an event Kiyosaki would be at – the “Investor Summit at Sea” cruise ship 9-day event put on by the Real Estate Guys – and he paid to attend
• Found out Kiyosaki’s close advisers were also attending
• The cruise was a life-changing experience
• At the event, he found out that his “tax challenge” was not a matter of bad laws but a matter of not understanding how to use the laws to your advantage
• On the cruise, he found out from Tom Wheelwright (a Rich Dad Adviser and now Dave’s personal CPA) that “if you change your facts, it will change your tax.”

His Light Bulb Moment

• He now realized it was up to him (Dave) to do something with the knowledge he now had and to change his tax situation
• He saw that real estate, or, more specifically, multifamily real estate (if you want tax savings “on steroids”), is the perfect tax protection vehicle
• In the beginning, he jumped into real estate not so much for the profits but more for the tax advantages

Building His Multifamily Real Estate Portfolio

• Dave started slow and began educating himself in real estate investing.
• He bought a couple of single family residences and a couple of five-unit buildings as a start.
• They did but but he realized that it did not make a real dent on his tax liabilities.
• Dave continued on to educate himself and ended up going on a three-day tour of the Memphis, Tennessee market.
• Early on, Dave partnered with a guy he met and purchased a 72-unit apartment, but the deal went sour and he ended up selling the property at a loss
• Later, in Memphis, he met up with a broker, Steve Woodyard, who connected him with his number one (#1) customer who had just bought 800 units in Memphis
• The gentleman was running out of cash and Dave had lots of cash to invest, so they decided to do a deal together
• This new partner had his own management company and team, Dave became the equity partner.
• They’ve done a bunch of deals together since then
• His new Memphis partner now manages his all assets.  It’s a good fit for Dave’s needs.  The Memphis partner takes care of the day-to-day management issues and is really good at what he is doing
• Steve Woodyard, his broker, handles 50% of all multifamily transactions in Memphis.  He talked Dave out of buying more properties rather than into buying.  He thinks in longer terms.

His Investment Markets

• 90% of multifamily portfolio is in Memphis
• Also has properties in San Antonio, Texas (couple of small multifamily units) and 88-units in Baytown, Texas
• Introduced by the Real Estate Guys to Belize market (he’s part of their Advisory Team)

The Importance of a Good Team

• If there’s an opportunity to do business with really good folks, he will do business over and over again with them, regardless of asset class
• He’s always interested in a good solid team with a good long track record of success
• More important than the asset class is the great teams you have around you

Syndication

• Dave started out primarily investing in multifamily with his own funds
• Then, he came to a point where he was running low on cash and needed to slow down.
• Dave was in the right place at the right time when he started his very first syndication.
• He was invited to sit on the founding board of a new local bank with other business owners and entrepreneurs
• He heard board members debating on investing in the bank because they wouldn’t see a cash return for 5-7 years.  But their thought was that it was at least better than putting their money into a CD that earns a half a percent interest
• Dave saw how he was making 10% -14% return on his deals
• When his next deal came along, he needed to raise $850,000 and he presented the opportunity to his fellow board members.  The bank came in with 75% and the investors came in with 25%.   The guys were happy and want to do it again.  They told their friends and then it grew organically from there.
• This is Dave’s very first multifamily syndication.

Building the Right Team

• Dave believes that once you know how to build a good team with solid key players (lawyers, CPA, banks, investors), you can refine the process and do it again even better.
• Syndication / SEC lawyer – Mauricio Rauld of Premier Law Group
• CPA – Tim Gertz of ProVision – To listen to a webinar that Dave and Tim did, hosted by Buck Joffrey, on Tax Laws and ways to reduce tax in 2018, just click here
• Don’t get intimated on setting up a team.  You can build a team as you are setting up the deal
• If you have a really good broker in the deal, he/she can introduce you to the banker, property manager, etc.
• Just find one or two experts.  A good guy will know other good guys
• His Rule:  “You don’t need to know everything about everything.  Go find someone with the “10,000 hours” of experience (experts – who put in 10,000 hours).  Team up with them, hop on their team.  Hook up with the “one thing” guy who is the expert

Biggest Mistake

• Teaming up with the wrong guy on Dave’s first trip to Memphis
• Did 72 unit deal together.
• His partner was convinced that it is the best deal ever.
• The partner was the syndicater but Dave was his only investor
• Dave came in with $700k as an equity partner
• Ended up losing money and walked away with only $250k  4 – 5 years later.
• It was a valuable lesson and the importance of  having “the right team” got pounded into him.
• It was fortunate that it happened before Dave had started syndicating his own deals
• Even though Dave was only schooled up to the 8th grade with his Amish education, this and many other “real life” lessons have taught him many multiple Harvard degrees worth of education through experience
• Even if there are other issues such as wrong market, wrong location, it still goes back to the quality of the team

Biggest Success

• Wouldn’t point to an asset as his biggest success, although they have done well in many
• To him, it is the ability to connect with the right people, form good teams and be get into the position where he is able to get into good deals with them.
• To be able to locate and build a team filled with “10,000 hour” experts
• Teaming up with the people who have their “one big thing” is critical.  Whether  it’s the multifamily guy or a self-storage guy or the ATM guy, joining together with those people makes all the difference on how successful you will be
• To be able to ask any team member a question and know you are getting an experienced, quality answer is key
• And foremost, it is imperative that each of your team members ALSO have the integrity, honesty required

Advice to Old Dawg’s Interested in Real Estate Investing

• First, quit thinking that you should have started earlier.  You can’t go back in time.
• Start with education
• Get around with the right people
• Join real estate clubs in your town
• Find people that are doing what you want to do
• Listen to those who’ve done it!
• I don’t care what you know, I what to know what you’ve done
• Find someone who has done it well and take them to lunch.  Find out how you can add value to what they do, connect and work with them (as you are mentored)
• Action is important, step out!  Start small, if necessary, but take action!

Where He Sees His Business in the Future

• Wants to work until the day he dies
• If it doesn’t make sense to do the same thing in the multifamily space as he enters 3 – 4 years space, then he may change strategies
• If it makes sense and it’s a win and he’s in the right place at the right time, he’ll still do some deals
• In the meantime, he will continue to build relationships
• Continue adding value for investors
• Backyard barbecue for his investors
• Continue to learn, not in a formal classroom, but while having fun with the team, hashing out ideas and strategies on the best position to win

Rap-It-Up

• Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
• Favorite business book: Go Giver by Bob Burg and John D. Mann
• Most valuable web site for success (other than your own): “DarrenDaily” – Daily Mentoring with Darren Hardy
• Favorite app: Financial Calculator
• Favorite quote: “You can be conventional or you can be wealthy, pick one.” – Dave Zook’s words
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? Spend half of it on education.

How to Reach Dave

• Website: therealassetinvestor.com
• Email: davezook@realassetinvestor.com

This Episode Brought to You by HealthIQ.com

This episode of the “Old Dawg’s REI Podcast” is sponsored by Health IQ, an insurance company that helps health-conscious people like runners, cyclist, weightlifters and vegetarians get lower rates on their life insurance.  To see if you qualify, get your free quote today at HealthIQ.com/OldDawg or mention the promo code OldDawg when you talk to a Health IQ agent.

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